If you’re searching for the best refinance company for your next home loan and want to avoid common mortgage mistakes you’ve come to the right place. Most homeowners dive into their mortgage refi with a reckless abandon that ends up costing them thousands of dollars in junk fees and unnecessary markup. Here are several of my best tips before you refi to help you avoid making these common mortgage mistakes.
Not Doing Your Homework Before Mortgage Refinancing
A recent survey by one financial blogger I follow indicates that the overwhelming majority of homeowners in the United States lack an understanding of mortgage basics. Terms like loan amortization and yield spread premium tend to draw bank stares masking panic for many homeowners when the topic of how to refinance a mortgage comes up.
The fact is that not learning mortgage basics accounts for homeowners in the United States losing sixteen billion dollars each year according to the Secretary of Housing and Urban Development. RefiAdvisor makes it easy not only to learn the basics but shows you how get the best refinance without paying junk fees or unnecessary markup of your mortgage rates.
Paying for Yield Spread Premium Instead of Loan Origination Fees
Another item on the list of common mortgage mistakes is the loan origination fee. This is the fee paid to the broker arranging your mortgage refi and a reasonable amount to pay for the mortgage origination fee is one percent of your home loan. Many brokers will tell you that you can save yourself a bundle at closing by letting the lender pay this fee for you, which sounds great until you see what it does to your monthly payments.
Why would the lender pay your loan origination fee in the first place? Lenders pay a fee called Yield Spread Premium to the broker arranging your mortgage refi for locking and closing your home loan with a higher than necessary interest rate. Lenders do this because they know that home loans with higher than necessary interest rates bring them premium profits when these loans are sold to investors on the secondary mortgage market.
The problem with this unnecessary markup of your interest rate (one of the most common mortgage mistakes) is that it drives up your payments by as much as $100 a month in many cases for the entire duration of your home loan. That’s as much as $1200 a year that you’ll be overpaying when you could have paid the loan origination fee upfront and walked away with lower payments for the entire duration of your loan.
It’s worth noting that recent changes to the laws regulating mortgage broker compensation changed in 2011 and your broker is now prohibited from charging you both a loan origination fee and taking yield spread premium from the lender. Don’t let a fast talking broker convince you that it’s better to let the lender pay your origination fee just to save a few bucks at closing.
Banks Might Not Be The Best Refinance Company
It’s true that banks are very convenient when it comes to getting your mortgage refi done and Bank of America is touting some very attractive rates at the moment; however, your bank might not be the best choice when it comes to paying unnecessary fees. The reason is that your bank is exempt from the Real Estate Settlement Procedures Act, including all the new changes to the law intended to protect homeowners from predatory lending practices. The Banking Lobby spent millions of dollars in the 1990s lobbying congress for banks to be exempt from this important legislation and was successful.
Bank originated mortgage loans are on my list of common mortgage mistakes for the simple question of why would you choose a lender for something as important as your mortgage refi that doesn’t have to play by the rules?
You can learn more about avoiding common mortgage mistakes like paying for yield spread premium and lender junk fees by checking out my free Underground Mortgage Refinancing Videos.
Here’s a quick sample to get you started on the road to your best refinance ever without overpaying one penny.